TEMPO.CO, Jakarta - Hotel companies need not complain to the government about the growing number of online services offering accommodation, nor do they need to ask travel services sites to be blocked. The growth of these new businesses is unstoppable as they offer great benefits to consumers and are helping grow a new type of economy. Rather than whining and wailing, it would be better for conventional players to embark on the more creative competition.
The presence of online businesses in several business sectors is clearly unavoidable. Every industry is affected, including the media, transportation services, accommodation, health and banking-none are escaping the attack by online competitors. Their impact on conventional business is certainly very damaging. Now, some are no longer simply competitors to "established businesses," but rather predators.
These new businesses are adopting a different model: cutting back many of the paths used by conventional businesses, they have diverse revenue streams and efficient business practices that in the end provide consumers with both convenience and cheaper prices. One such area is travel and accommodation services. These have grown rapidly over the past three years and will still continue to grow.
Statista.com data shows that in three years (2014-2017), turnover in Indonesia’s online travel and accommodation services soared by 65 percent, from US$4.3 billion (equivalent to Rp57.5 trillion) to US$7 billion (around R 94.5 trillion). Three years from now, the figure will reach US$10.5 billion or around Rp142 trillion. Some major players are involved, both foreign and domestic, including Agoda, Traveloka, Tiket, AiryRooms, Airbnb, and HomeAway, not to mention dozens of other smaller services.
Aside from the developing Internet and cellular networks, a number of other stimuli are helping online travel and accommodation services to grow rapidly. In 2014, the Ministry of Communications stopped airlines from selling tickets at airports. Kereta Api Indonesia is also promoting its online sales. All travel agencies should be fighting for their share of this opportunity, but they are still too slow to respond and are losing out to Traveloka.com or Tiket.com. People no longer need the services of an intermediary such as an agent and consequently no longer need to pay an intermediary fee.
The only way they can fight back is to join the online business es to get their share. Latest developments in technology and in consumer behavior require conventional businesses to adopt the new business model. The Matahari Group, for example, has already done so by setting up its MatahariMall.com. Compared to Lazada, Bukalapak, or Tokopedia, the company is still losing out. But the move allows Matahari to keep its customer base, with at least 4.6 million visits to the site each month.
If one needs to demand anything from the government, it should concern taxes, especially on foreign companies. Domestic companies clearly pay their taxes here. But individuals who rent out their homes through, for instance, Airbnb must also pay an income tax. For this reason, the government needs to regulate taxes on foreign companies seeking to get their fill here. At the very least, regulation may mitigate the clash between conventional and online businesses, as well as foreign and domestic companies.
Read the full article in this week's edition of Tempo English Magazine
